WOOL trading continued at higher price levels in Australia later this week after a solid rise in auction prices mid-week, sparking speculation the Australian market might have rebounded from its ‘bottom’.
Australian Wool Exchange senior market analyst Lionel Plunkett said the Australian wool market has recorded solid price increases for the second consecutive week, with all sectors recording gains.
“From the opening hammer, it was immediately apparent that price increases were again on the cards.
“By the end of the series the individual Micron Price Guides (MPGs) across the country rose by 30 to 117 cents,” he said.
“These solid increases helped to push the AWEX Eastern Market Indicator (EMI) up by 47 cents to 937c/kg clean.
“This equated to a 5.3% rise in the EMI, the largest weekly rise (in percentage terms) since September last year,” Mr Plunkett said.
“Due to a strengthening Australian dollar, when viewed in US$ terms the rise in the EMI was higher, a US43-cent rise and an increase of 6.7 percent.
“In a positive sign for the following week, the Fremantle region selling last, continually strengthened as the sale progressed,” he said.
“So much so, that the Fremantle MPGs for 19.0 to 21.0 micron closed at higher levels than those in Sydney and Melbourne.”
The national offering this week increased to 29,408 bales, up 9754 bales on last week, and brokers passed in just 5.9pc.
“The larger offering attracted very strong widespread competition,” Mr Plunkett said.
“The skirtings again followed a similar path to the fleece, recording solid increases, generally between 40 and 60 cents.
“The crossbreds also made further price improvements, the crossbred MPGs gained between 9 and 55 cents for the series, with 28 micron and finer wools recording the highest gains,” he said.
“Solid gains for locks, stains and crutchings pushed the three Merino carding indicators (MC) up by an average of 30 cents.”
New business bodes well for next week
Although the lift in prices was initially partially attributed to a shipping squeeze, Elders National showfloor manager Simon Hogan said more business was done after the auctions finished this week, leading to the expectation of a potentially dearer market next week.
“It’s looking quite positive for next week, even one exporter described there has been a bit of a panic from China, that coming of a really low base, some mills feel they might have missed the bottom and are now jumping in.
“We haven’t been selling a lot of wool in recent weeks and some mills’ stocks are low,” he said.
“One trader said it has been one of the craziest weeks he can recall in his time in the industry.
“He said we were losing money on clips earlier in the week and now fresh business is being done – he said it just been a crazy week.”
Mr Hogan said wool was also being sold on the AuctionsPlus offer board “on the back of more business being done.”
“There is just a better vibe, let’s hope it has bottomed.”
However, the lift has not yet been enough to entice more wool onto the market and increase next week’s offering.
Chinese mills coming back in to build stocks
Endeavour Wool Exports trading manager Josh Lamb said more significant than the continuing business after this week’s auctions is that prices have continued to improve since the close.
“The market looks pretty good for next week.
“I think it would be safe to say that we are off the bottom, but there is no clear indication what the top side is,” he said.
“There are still lots of question marks and is everything forgotten just because we’ve had a good market?
“No, of course not, but some fundamentals have improved in China over the last two to three weeks and that is playing through to the market with historically low prices and offerings, it is having a biting effect,” Mr Lamb said.
Mr Lamb said he is hearing that prices for processed wools in China are improving.
“The more positive news behind it is that the conditions are improving in China as far as downstream with wool.”
Mr Lamb said some early stage Chinese mills might not be carrying any stock at these lower price levels.
“So they are keen to secure something at what they might consider the bottom of the market for now.”
The national quantity decreases next week to 25,030 bales. Fremantle will sell on Wednesday, and Sydney and Melbourne on Tuesday and Wednesday. Sydney is a designated superfine sale.
Click here to see the latest AWEX Micron Price Guides.